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Golub Capital BDC's CEO Discusses F2Q12 Results - Earnings Call Transcript

David Golub

Thank you, operator and good afternoon everyone, thanks for joining us today. I am joined by Ross Teune, our Chief Financial Officer. Yesterday in the afternoon we issued our second quarter earnings press release and we posted supplement earnings presentation on our website. We’ll be referring to that presentation through the call today.

I am going to start by providing an overview of the March 31, 2012 quarterly financial results. And then Ross is going to take you through the quarterly results in more detail. I’ll come back after Ross comments and provide some commentary on the termination of our total return swaps in April and also provide an update on current market conditions.

With that let me get started. As highlighted on page one of the investor presentation, we’re pleased to report we had a very strong quarter for the three months ended March 31. Golub Capital BDC generated net income of $11.4 million or $0.48 per share as compared to $6.2 million or $0.28 a share for the quarter ended 12/31/11. Net investment income for the quarter was $7.1 million or $0.29 of share as compared to $6.3 million or again $0.29 a share for the quarter ended 12/31.

Net investment income including the net spread payments of $1 million generated from the underlying assets in the total return swap was $0.33 per share for the quarter ended 3/31/2012 and that compares to $0.32 per share for the quarter ended 12/31/11. Let me give you some detail underlying the $0.19 per share, the $4.4 million of net realized and unrealized gains on investments and derivatives during the quarter.

First, let’s look at the total return swap. GAAP net realized and unrealized gains on the total return swap were $2.8 million and that was comprised of $1.8 million of unrealized gains driven primarily by a market rally in the prices of broadly syndicated loans during the quarter as well as an increase in the net interest accrued on the TRS. In addition to that we had a million dollars of realized gains from the quarterly cash settlements of the TRS. I will come back later in our commentary to describe the P&L impact of the termination of the swap that took place in the April as I will discuss. There was a further gain that will take into the income statement in the June 30 th quarter.

Now let’s talk about investments in loans and equity securities. Net realized and unrealized gains on investments were $1.2 million. This was comprised of $2.8 million realized loss on the sale of a non-earning asset [AFPG], $3 million of unrealized depreciation because the carrying value of that asset was actually lower than the sale value and a $1 million of unrealized appreciation on the investment portfolio and this was broadly distributed across a variety of middle market debt and equity securities.

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